Steeper health premiums hit small businesses hard

As Congress nears votes on legislation that would overhaul the health care system, many small businesses say they are facing the steepest rise in insurance premiums they have seen in recent years.

Insurance brokers and benefits consultants say their small-business clients are seeing premiums go up an average of about 15 percent for the coming year — double the rate of last year's increases. That would mean an annual premium that was $4,500 per employee in 2008 and $4,800 this year would rise to $5,500 in 2010.

The higher premiums at least partly reflect the inexorable rise of medical costs, which is forcing Medicare to raise premiums, too. Health insurance bills also are rising for large employers, but because they have more negotiating clout, their increases are generally not as steep.

Higher medical costs aside, some experts say they think the insurance industry, under pressure from Wall Street, is raising premiums to get ahead of any legislative changes that might reduce their profits.

The increases come at a politically fraught time for the insurers, as they try to fight off the creation of a government-run competitor and as they push their case that they have a central role to play in controlling the nation's health care costs.

President Barack Obama, in his weekly radio address yesterday, said the Democrats' health insurance overhaul would help small businesses and stimulate the economy by providing relief from “the crushing costs of health care — costs that have forced too many small businesses to cut benefits, shed jobs or shut their doors for good.”

The insurance industry already has been under sharp attack by Democratic lawmakers who favor creating a government-run insurance plan that would compete with private insurers.

Without that competition, proponents say, insurers will continue to price coverage beyond the reach of many Americans.

Small businesses, which employ about 40 percent of the private labor force, are a big constituency for both parties.

House Speaker Nancy Pelosi said the sharp rise in premiums for small businesses offered the latest evidence that Congress must act swiftly on health care legislation.

“This underlines the urgent need for health insurance reform, including a public option,” Pelosi said in an interview. “We need to have competition for the insurance companies to keep premiums down.”

Insurers say there is no need for a government-run insurance plan and argue that their health plans are already responsible for many of the initiatives, such as programs to coordinate care for chronic conditions, that ultimately lower costs.

Insurers' “profits are not responsible for increased health care costs,” said Robert Zirkelbach, a spokesman for the industry's trade group, America's Health Insurance Plans.

Like the insurers, Republican lawmakers, who portray themselves as champions of small business, argue that the proposed legislation would raise premiums across the board because sick people would be more likely to enroll than healthy people.

They also say the taxes and other ways of paying for the program would be passed on to employers in higher premiums, only making matters worse for small businesses.